Cambridge Consultants Blog
Why do big Government Innovative Product Development often go wrong and what should we expect from the SMART Metering roll out?
By Alan Richardson - Last updated: Wednesday, December 21, 2011There’s a long history of cost overruns, delays and problems in major government procurement whether it be a radio for the military (see Delivering Digital Tactical Communications Through the Bowman CIP Programme … By Great Britain: National Audit Office) or an IT system for the NHS that had to be scrapped after £12bn of costs had been incurred. In fact, it’s almost an oxymoron to talk about government innovative development in the UK, so commonly are these programmes delayed, cancelled or don’t deliver the promised benefits. To be fair in smaller projects, we do see more creative cost effective solutions.
As I see it, there are a number of inherent problems in the way things are currently done that almost guarantee the outcome outlined above. Amongst these are:
- Mixed agendas, for example, the best value solution versus supporting the British economy versus supporting innovation and complying with treaty obligations such as EU free trade rules versus benefits in marginal seats
- A total lack of understanding of the cost of delay. Most governments and bureaucracies get criticised in the media for projects that go wrong, paradoxically they get little criticism for doing nothing and yet this always comes with cost escalation
- An ability to always see the limitations in commercial off the shelf solutions whilst being blind to the limitations of custom solutions. There’s a strange psychology of looking backwards criticising custom solutions specified by government and yet looking forwards always choosing yet another custom solution
- A lack of technology understanding in government leading to an inability to understand the cost drivers of “requirements”. This is characterised by committees adding a few requirements oblivious to the billions in cost being added
- The smaller projects tend to run better because the costs and benefits are more readily understood and the people running them have a better overall understanding without the drag from committees and hierarchies of management and approval
Successful innovation in the private sector is, in many ways, more conservative, but also much more effective. So when Apple created the iPAD it didn’t try to recreate everything; it uses WiFi, the internet, 3G. When Banks introduced computer banking, they used PCs and the internet. There’s usually a controlling mind rather than a levelling down committee. The project builds strongly on other R&D in the world and so remains up to date with time. In contrast, around much of the world, governments are currently engaged in SMART metering projects where they seem to think that recreating a government communications infra-structure is necessary rather than using the internet. The process involves large committees from government, energy companies and other stakeholders. Very little ever gets subtracted in this process, it intrinsically loads more costs as it crawls slowly into the future, whilst delaying decisions. In doing this they will create a single point to attack for cyber-criminals and hostile states and big databases that they will not succeed in keeping confidential. The cost of these projects is huge, typically 5-10 billion pounds and they’re only in the planning stage so they’ll probably cost much more. The assumed benefits are largely efficiency savings in the energy companies (relating to management of bad debts, automatic switching of consumers from credit to pay as you go tariffs) companies rather than reduction in carbon through energy efficiency. And wasn’t that meant to be the reason for introducing these meters in the first place (trouble is the carbon savings don’t justify the ticket price).
So whilst everyone is busy at this time of year making predictions of what 2012 will bring, I thought I would share some of mine:
- SMART Meter roll-out will not be achieved by 2020 – the government process continually delays the start without changing the end date
- The project costs will grow to more than £15 billion for the initial roll out
- And then the system will be obsolete in less than a decade and if the benefits are really required, the same order of cost will be expended again
- Consumers will probably hate the result when they see the impact on their privacy and the action the energy companies take against vulnerable people such as cutting their energy supply remotely (whether as a result of a dispute or a mistake)
- Carbon saving will be minimal (<3%); the country would achieve much more by spending the same amount on insulating buildings
I truly hope I’m proved wrong before it is too late. The stakes, after all, are high for us all.
